Tech stocks have taken the latest FOMC minutes in its stride, despite already having dropped considerably over the past week over fears of a more-hawkish-than-expected Federal Reserve.
To be clear, the overnight release of the minutes from the previous FOMC meeting still point to US interest rates moving higher in order to quell still-stubborn inflation.
However, “almost all” officials preferred the downshift to the relatively smaller hike of “just” 25 basis points (bps), as opposed to the “few” officials who favoured the larger 50bps hike.
Still, we know that those minutes were from a discussion that occurred prior to the jaw-dropping US jobs report we received at the onset of this month, followed by further evidence of higher-than-expected US inflation.
And as we know, the prospects of US interest rates moving even higher so as to quell inflation have been a thorn in the side of tech stocks, with this theme still having more ways to go before reaching a conclusive end.
NQ100_m bulls looking to create gap above psychological 12k mark
In the leadup to this latest FOMC minutes, the NQ100 minis had already dropped close to the psychologically-important 12,000 mark, wiping out all of its February gains along the way, only to stage a slight rebound since.
However, if markets are forced to price in US interest rates going past the current forecasted peak of 5.36% in July, that could see the NQ100_m testing immediate support around the 11,932.3 mark.
This crucial support level is drawn at the 23.6% Fibonacci level from the November 2021 – October 2022 plummet, with its 200-day simple moving average (SMA) also lingering close by for added support.
Notably, this region played the role of resistance between mid-November and mid-December 2022, and may well turn into a support level over the near-term.
However, despite the declines over the past week, the benchmark Nasdaq 100 index still boasts of a 10.3% year-to-date gain.
And for proper context, it remains 27.2% lower from its highest-ever-closing price registered on November 19th, 2021.
Tech stocks still have all to do in order to build upon its year-to-date gains and revisit recent gains around the 38.2% Fib line.
Ultimately, US inflation has to take meaningful strides lower towards the Fed’s 2% target to allow the Fed to pause on its rate hikes.
Such an outlook, in turn, is likely to give risk assets, including the NQ100, more conviction to prolong its stellar start to the year so far.
Key upcoming events for tech stocks:
On that front, look out for the following tier-1 US economic data in the lead up to the next FOMC meeting:
Should markets increasingly expect an actual Fed rate cut in Q3 2023, or even an official pause on the Fed rate-hiking cycle at its next policy meeting in May (52% chance of such an occurrence), that should help the Nasdaq 100 officially lay claim to a bull market.
23 March 12:10
Governments and central banks across major economies are scrambling to limit the knock-on effects from the rapid collapse of Silicon Valley Bank (SVB), a key financier of the tech and startup ecosystem around the world.
13 March 11:19
However, this latest iteration is likely to succumb to fundamental drivers over the course of this month that are set to have a greater influence rather than technical signs.
9 March 11:56
At the time of writing, the futures contracts for the S&P 500 are extending February’s declines into this month. At the time of writing, the benchmark index for US stock markets has gone below the widely-watched 100-day and 200-day simple moving averages (SMA), having earlier already broken below the uptrend line from October’s trough.
2 March 11:05
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